Nibbling checks

Our bank, like many banks, will issue Cashier's Checks to "guarantee" funds for noncustomers. Additionally, we don't keep an abundance of cash on hand. We recently had a noncustomer do this with a large >$20,000 check. The branch didn't have the cash, so they issued a check, but let the noncustomer get $3,000 cash out of it. In other words, they issued the Cashier's Check as $3,000 less than the original.

I contend that this equates to nibbling the check. While the noncustomer didn't request this to avoid any reporting, to me, it still seems ... uncool.

Our BSA group disagrees, contending there was no intent to avoid reporting. I countered with, "how would the regulators know that?" I'm told this has been a regular practice for years.

Looking for some input to rest my mind. Is this a common practice out there?

Our bank, like many banks, will issue Cashier's Checks to "guarantee" funds for noncustomers.

What does this mean?

I think the original poster means that their customer writes a check to an individual or company that is not a customer of the bank. The individual or company brings the check directly to the original poster's bank instead of cashing it or depositing it at their own bank to ensure that the check is good and will be paid.

In this situation, by policy, you create scenarios that look like structuring so you need to ensure that you properly document your policy and circumstances surrounding the transactions. We have had similar situations that have occurred when a customer wants to withdraw a significant amount of cash, but the branch doesn't have it on hand. The customer is instructed that if they want the additional cash, they will need to visit a nearby branch location. From a back office perspective, it looks like structuring until you know the circumstances behind it.

If that is the case, then I can tell you that most banks will not do this at all. The non-customer can cash the original check or they can deposit the original check in an account they hold elsewhere. No exceptions.

It is ridiculous for the bank to engage in this practice. There is absolutely nothing in it for the bank, accept headaches.

It is ridiculous for the bank to engage in this practice. There is absolutely nothing in it for the bank, accept headaches.

Agreed

I originally read the title of this post as nibbling cheeks and was very curious....

actually, a great number of banks will perform this - they are community banks and believe it serves their customers. agree that it creates all types of headaches, but customer service tops headaches, in their minds.

How do you give customer service to non-customers??

my customer wrote a check and gave it to someone...if I refuse to honor the check they wrote on my bank, I am not servicing my customer...regardless of whom the check is written to, my customer as the check writer may suffer if I don't allow it to be cashed, or traded for cashiers check, etc...

not saying it is right or wrong, just that many follow this pattern of thinking

my customer as the check writer may suffer if I don't allow it to be cashed Yes , or traded for cashiers check No , etc...

It is a strange way to think about customer service.

my customer as the check writer may suffer if I don't allow it to be cashed

Actually I do not see this either. Your customers responsibility ends when they issue a check

I went to a bank to cash a check that was drawn on the bank. I do not have an account with the bank and they refused to cash the check. Can it do this?

Yes. There is no federal law or regulation that requires national banks to cash checks for noncustomers. Most banks have policies that allow check cashing services only for customers who have an account with them in order to protect both themselves and their customers from forgeries.

Once a national bank cashes a check that has been forged by a noncustomer, they may lose money if they cannot collect from the person who cashed the check.

Also, if a national bank agrees to cash a check for a noncustomer, it may legally charge the presenter a fee

http://www.helpwithmybank.gov/get-answer...cashing-04.html

and before we get into the dishonor issue
http://www.legalmatch.com/law-library/article/dishonoring-of-checks.html

A check is dishonored when it is presented for payment to the payor bank (for situations other than immediate payment over the counter) and the bank makes timely return of the check or sends timely notice of dishonor or nonpayment. - See more at: http://www.legalmatch.com/law-library/article/dishonoring-of-checks.html#sthash.9dfZckWm.dpuf

JK,

"Nibbling" is a new label for me. However, if the suggestion that the payee take part of the proceeds in the form of an official check rather than currency came from your personnel. So, there is no argument that the payee is structuring. There is only an argument that it might look like structuring to someone reviewing the transaction who was not actually present. A $3,000 cash back simply would not suggest that to me.

many a community banker would disagree on that point.

Completely agree with Happy. I've only worked in Community Banking, and we would never want to disservice our customers by not paying their checks.... however, while our bank might prepare this check if we didn't have the cash, we'd probably tell the non-customer to plan their next visit with us so we can order the cash we need for it. So it would only happen once and couldn't look like structuring. Reading this, I'm mostly shocked that any branch of any bank doesn't keep enough cash on hand to cash a $20,000 check. That's not THAT much cash.

All my banks have reluctantly allowed the 'nibbling' mostly for attorney firms that bank with us. We feel most of the attorney's clients are not structuring so much as using the cashier's check as a savings account. Annoying, but not suspicious usually.

Once you have issued the initial cashier's check, you would certainly be within your rights to tell these non-customers their choices are to (1) cash the check in its entirety (assuming appropriate identification and sufficient cash on hand), or (2) deposit the check at their own bank and "nibble" on the funds from there.

agree 100% John...they have the initial visit, and there in ends the customer service. they want to come back later and cash the cashiers check and take a portion in cash and reissue the remainder in a new cashier check, that is not going to happen (although in many they allow it to occur).

In another thread one poster succinctly indicated their rule is "You cannot buy a cashiers check with another cashiers check, customer or not." While that's not the issue that started this thread, it's the solution to nibbling.

Our community bank does this activity as well. Our customers who "nibble" checks use it as a savings, and only take some funds when they want it. We have an examiner who found a check that went three years without being cashed (on our outstanding items report), and when it was cashed, she took $3600 in cash, and got a new check issued for the remaining $7400. We also cash a portion of checks for non-customers, and issue a cashiers check for the balance when the branch does not have the funds to give them at once.

Management already has a notation in our current policy/procedures for check cashing that prohibits this type of activity. This was added by the previous BSA Officer (4 years ago). But the front-line staff still cashes a portion of the check and issues a new check for the balance. The management staff would like some written guidance on this activity, and I cannot seem to find anything specific. Does anyone know where I can find information on this type of activity? I tried searching for structuring with monetary instruments and of course received too much information.

Thank you in advance!

Management staff wants guidance, even though there is already guidance in your policy/procedures prohibiting the activity? Was the policy/procedure that includes that guidance not already approved or accepted by your board or management? Is management re-evaluating that guidance to determine whether it needs to be amended or omitted?

Although there are customers (and non-customers) who "nibble" on cashier's checks for what they believe are legitimate reasons, there are also those who use the practice as a way to structure transactions in attempts to avoid reporting. With that in mind, does the guidance you already have make sense risk-wise? If so, perhaps the only problem is that the policy has been ignored long enough to lack any teeth. That can be easily resolved by management by restating the policy and management's intent to enforce it, with appropriate action taken when someone decides he or she can continue ignoring the policy.

There is nothing "official" on this; it is not mentioned in examination procedures or any other official publication. It's simply a "gotcha" that is passed on from one examiner to another. Most of the time, the customer's motivation is exactly as you explained it; i.e. the check is a savings account, nothing more.

The response to the examiner that just cannot fathom why someone would not put the funds into an interest bearing account: "Have you seen our interest rates today?"

John's comment prompts me to add: If you do prohibit it by policy or procedure and you do not enforce the restriction, I would be first in line to deliver a scathing criticism.

Management is re-evaluating that notation in our current procedures about amending or omitting, due to the fact that it has been ignored for so long and the new management staff are not in consensus about the activity being suspicious enough to prohibit the action.

I am trying to bring something written by an authority on the matter to the managers to confirm the need for this procedure. I was hoping someone would know where I can find this, whether written in a FinCEN guidance, or in the BSA Exam Manual.

Thank you Ken and John! I would agree with you completely.

Management is re-evaluating that notation in our current procedures about amending or omitting, due to the fact that it has been ignored for so long and the new management staff are not in consensus about the activity being suspicious enough to prohibit the action.


Staff ignoring policy should never be the reason for dismissing it. There is also the issue of non-customers nibbling which cost the bank money (teller time accounting time) and exposes the bank to additional Regulatory risk (real or imaged)

The solution is simple. Implement a $20 fee for every partially redeemed cashier's check involving a re-issue. BSA is one thing, but the bottom line is that there is absolutely nothing in it for the bank in perpetuating this behavior by either customers or non-customers. The problem will solve itself.

I can see a new topic already:

we implemented a $20 fee for re-issuing partially redeemed cashier's checks, and our officers want it waived...

but I do like the extra fee for doing so

our officers want it waived

Fine - have them write the $20 check for the fee - especially for the non-customer that most likely cannot be banked or choose not to use them.

It all comes down to who the officer is loyal to - apparently it is not the other employees or the shareholders.

I would even offer that if I had taken a check from XYZ, Inc. before and had it charged back that I might rush to the bank on which the check was issued to see if it was good. At that time I might prefer a cashier's check over cash since I don't want to carry cash.

At the end of the day, discussion with staff who conducted the transaction is pivotal to determining the intent of the person who carried on the transaction.

Let see:

Spend an hour trying to convince an examiner that the transaction is not suspicious and not winning or nibbling a check for a non depositor and starting the bank on a path for BSA issues and costs for the bank in the millions.?

Customers can cash the check and place proceeds in account.

Pardon the reviving of an older thread, but I'd like a little input.

After examiner "suggestion" - my FI reviews any Cashier's Check that's been outstanding for 6 months to see if the Remitter & the Payee are the same. If so, I reach out to the customer for an explanation about the item being held. If I get "none of your business" or anything else unhelpful, I file for "no apparent economic, business, or lawful purpose."

After focusing on this process, we detected a few "nibblers." In an effort to deter nibbling (if "hiding" the money in a Cashier's Check was the goal of the customer), we no longer sell a Cashier's Check directly with another Cashier's Check. Our customer must deposit the original check into their account & then conduct a separate transaction to purchase a new Cashier's Check for the new amount they want. At least the customer's account statement will reflect the deposit & the withdrawal. If the customer was trying to "hide money" by keeping it out of their account, the statement will indicate that the customer had this money (if we received a subpoena for these records).

In some cases, the additional step worked to deter nibblers.

In other cases, the customers are perfectly fine with depositing then withdrawing for a new check. For example, a customer with a $2,000 C.C. made from John Doe to John Doe has no problem depositing the $2,000 check into his account then purchasing another C.C. in the amount of $1,500 from John Doe to John Doe.

If someone has no hesitation following our procedures, which creates a paper trail in their account, do you agree that this is not suspicious?
While it seems weird to me that someone would conduct business this way, some people just do weird things, right? Do you think this rises to a reporting level?

If the original funds were legitimate, then what difference does it make if I buy a cashier's check payable to myself and hold it in my safe at home for emergency purposes? If a SAR was required, it would have been required at the initial purchase - other than that, you are chasing the wind.

Problem is, at some point the account hits the radar and then you research back and back to fine the original source of funds in order to make the determination it's not suspicious. Depends on your resources, I guess. We generally do not allow the rolling of cashier's checks. As with everything in a community bank, exceptions occasionally get made. But at least a conversation is part of that.

No. I don't even think it rises to a monitoring level. To avoid both I would implement a policy that says: "A cashiers check can be deposited or it can be cashed, but it cannot be used to purchase another cashiers check."

Failing to cash a cashiers check for $20,000 has exactly the same financial ramifications as keeping $20,000 in a non interest bearing account, it's indicative of a lack of financial acumen. However, at today's interests rates, it's not worth raising an eyebrow.

Thank you. I appreciate each of your input.
To Randy's comment of me "chasing the wind," I feel like much of the examiner focus lately has me doing just that.
I won't go into a rant, but the frustration is real.

Thanks again.

We actually experienced elder abuse with cashiers checks. Bob's house was sold and the funds deposited into his account. We had a POA come in and w/d the funds in a cashiers check from Bob's account, payable to Bob and place the check in a safe deposit box that Bob did not have access to enter. Several additional checks were withdrawn. The POA then started cashing out just less than $10,000 and getting a new check for the balance. It appeared to me that the POA was hiding the funds from other possible heirs and gifting himself with a $10,000 cash gift each year. Once I stated asking questions, the POA admitted they were hiding the funds from Bob, and anyone else looking for his assets (nursing home!).

Holding a cashiers check is a GREAT way to hide funds.